Vancouver Luxury Home Prices Continue to Surge in 2016

The Canadian city topped Knight Frank’s global prime house price index for fourth consecutive quarter

The runaway train that is luxury house prices in Vancouver showed no sign of slowing down, soaring by more than 25% over the past year.

Vancouver, famed for its picturesque coastal location and mountains, topped real estate consultancy Knight Frank’s index of high-end annual house price growth in 35 cities around the world for the fourth quarter in a row in the first three months of the year.

A severe lack of supply and increased foreign demand attracted by a weak Canadian dollar have continued to push up the average cost of a home in the Canadian city. Supply is currently at its lowest level in a quarter century.

Shanghai, Sydney and Melbourne also recorded double-digit annual price growth. Average prime property prices in Shanghai jumped 20% in the three months to the end of March compared to the same period a year earlier as record-low interest rates and cheap financing fueled demand. However, a new government crackdown on lending is likely to result in slower growth in the second quarter.

Sydney and Melbourne, meanwhile, both witnessed annual growth of just over 12%. Prices could rise further as Australia’s central bank decision today to cut interest rates to a record low of 1.75% will no doubt further fuel demand for Australian homes.

In London, higher sales tax rates continued to take its toll on high-end prime house prices in the U.K. capital, which grew by just 0.8% year-on-year, the lowest figure since October 2009 when the global downturn struck.

A 3% sales tax surcharge was slapped on buyers of second homes and rental properties in the U.K. on April 1. The increased tax — known as a “stamp duty” — comes on top of higher sales tax rates introduced by the British government on expensive homes in December 2014.

Overall, Knight Frank’s quarterly global house price index increased by 3.6% in the year to March. Hong Kong and Taipei occupied the bottom of the rankings with luxury prices dipping 6.4% and 7.6% respectively.

Kate Everett-Allen, a partner and international researcher at Knight Frank, said: “Since 2014 the index has consistently recorded annual growth of 3-4% with no city recording double digit annual price declines since Q2 2015.”

A separate report by Redfin found that global economic volatility dampened demand for luxury homes in the U.S., defined as the most expensive 5% of properties sold, in the first quarter of 2016. As a result, the average sales price of luxury homes fell 1.1% compared to last year, the first fall since 2012.

In Miami Beach, a glut of luxury development paired with foreign buyer skittishness caused luxury home prices to fall 13.7%, while prices in Austin and Boston dropped 12%.

San Francisco also witnessed a 4.7% drop in the first quarter compared with a year earlier. A rocky stock market and lower tech company valuations kept some would-be investors on the sidelines.

Nela Richardson, chief economist at Redfin, said: “Luxury buyers recoiled from high-end spending in the face of volatile asset prices. Luxury demand, especially for vacation and investment properties, has been more fragile this year, causing prices to slump.”